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Having good credit is something you want to aim for at all stages of life, but what some people don’t think about is how important credit is when you reach retirement. When you retire, you want to have as much financial freedom as you can so you can live out the rest of your years in financial peace. Unfortunately, bad credit can get in the way of that if you’re not careful.

Why It’s Important to Have Good Credit in Retirement

You May Need to Take out a Loan

Retirement comes with a lot of expenses, some of which can be unexpected. If you’re in a financial bind and don’t want to dip into your savings, or if you simply don’t have the funds, you might need to take out a loan.

Having poor credit will cause your loan interest rates to skyrocket, and this is more money taken from out of your pocket.

You Could Want New Housing

Many retirees opt to move housing in their retirement, whether that be to find warmer weather, be closer to family, or other miscellaneous reasons. If you don’t have the money to purchase the housing you want, you’ll likely have to turn to renting or take out a mortgage.

Good credit in these situations will give you competitive rates, so if you don’t have a decent credit score, moving locations will take a big chunk of your retirement income. For example, according to Money Under 30, a 625 credit score in comparison to a 750 score could add half a percent to your mortgage rate.

Covering your medical bills and expenses in retirement may mean you need to apply for a new credit card, put the bills on a current card, or even take out a personal loan. Any of these options will save you money in interest rates if you have a better credit score. Also, if you don’t have the funds to pay your medical bills, that medical debt can impact your credit score and negatively affect you in the future.

Traveling Isn’t Cheap

For many retirees, travelling is one of their top priorities. No more work deadlines or worries of waiting for paid time off. The tricky thing about traveling, however, is that it isn’t cheap. A common way to save money when traveling is having good credit cards that specialize in travel rewards, resulting in free flight miles, discounts on hotels, car rental coupons, etc.

A good travel credit card with competitive rates is hard to come by if you have a poor credit score. There are options, but the rates will likely be a lot higher, which will take a toll on your retirement income.

How to Maintain and Improve Your Credit Score Before and After Retirement

Pay Off Debt

Going into retirement isn’t going to be easy if you have a great deal of debt trailing behind you. Make it a priority to pay off as much debt as you can before you retire, whether it’s credit card debt, past-due bills, etc. This will improve your credit score immensely and will help you enter retirement worry-free.

Don’t Close Your Credit Card Accounts

You may be in a hurry to close your credit card accounts because you want to go into retirement debt-free. Although it’s a good move to have no credit card debt, you still want to keep your accounts open. Closing your accounts will affect your credit history, which makes up 15% of your credit score. Keep your accounts open if you want to continue to improve your credit history and score.

However, if you’re trying to live a frugal retirement, be careful not to accrue too much debt with your open credit cards. If you need to set limits for yourself or even leave your credit cards at home to avoid over spending, consider doing so.

Open Additional Accounts if Necessary

If you don’t have a lot of credit or if you need help improving your current score, it may be a good idea to open additional accounts. However, continue to use your accounts wisely and check your credit utilization ratio often to ensure you’re not hindering your credit score progress. Ideally, you want your credit utilization ratio to be less than 30 percent.

Consolidate Your Debt

Keep in mind that debt consolidation won’t be the best option for everyone. However, there are many cases where it would simplify your debt, lower your interest rates, and save you money each month. Consider debt consolidation and consult a professional if you think this might be the right thing to do to prepare for retirement.

Pay Your Bills on Time

Paying your bills on time is always important but especially before and after retirement. You don’t have as much time to make up for a poor credit score at this age, so make it a priority to pay your bills on time.

Just a 30-day payment delinquency could account for a 90- to 110-point credit score drop. This could significantly affect your financial situation in retirement and you don’t want to create bumps in the road for yourself.

Frequently Check Your Credit Reports

Many websites allow you to check your credit for free. You can see where you currently stand, what’s impacting your credit score, as well as how you can improve it. You can’t manage or keep track of your credit if you’re not checking it often, so don’t forget to make that a priority.

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McCall is currently a content marketing strategist for BestCompany.com. Her work has been featured on Yahoo Finance, Forbes, MarketWatch and a variety of other well-known sites. She earned her degree in English and Technical Writing from Weber State University. You can find her work at Best Company. More by McCall Robison

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Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

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The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

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Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

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